Oil prices moved in a flat-to-low range in Asian trade on Wednesday as industry data pointed to an unexpected build in U.S. inventories, while weak economic readings from the U.S. and China also dented the outlook for demand.
Data from the American Petroleum Institute showed that U.S. crude inventories grew by about 3.7 million barrels in the week to May 12, ducking expectations for a 1.3 million barrel drawdown. Gasoline and distillate inventories marked a sharp drop.
The data usually heralds a similar trend from an official reading due later on Wednesday, and showed that oil supply in the world’s largest consumer remained bloated, although releases from the Strategic Petroleum Reserve (SPR) also factored into the inventory build.
The drop in gasoline and distillates pointed to improving demand ahead of the summer season, which usually sees increased air and road travel.
But other readings from the U.S. still pointed to worsening economic prospects this year, as retail sales missed expectations for April and industrial production remained depressed. This, coupled with increased market uncertainty over raising the U.S. debt ceiling, weighed on crude prices, according to Investing.
Brent oil futures fell 0.1% to $74.52 a barrel, while West Texas Intermediate crude futures fell 0.6% to $70.47 a barrel by 20:57 ET (00:57 GMT). Both contracts fell about 0.7% on Tuesday.
Weaker-than-expected retail sales and industrial production data from China cut short a recovery in crude prices on Tuesday, as investors fretted over a demand recovery in the world’s largest oil importer.
A string of weak economic readings this month showed that a post-COVID rebound in China was likely running out of steam, sparking questions over whether the country will drive oil demand to record highs this year.
This saw traders largely look past forecasts from the International Energy Agency that crude demand will hit record highs this year, which was also posited by the Organization of Petroleum Exporting Countries.
Plans by the U.S. government to begin refilling the SPR also provided a limited boost to oil prices this week, given that the initial 3 million barrel buy flagged by the government accounts for a fraction of daily global consumption.
A rebound in the dollar also stymied crude prices after a string of Federal Reserve officials offered a hawkish outlook on monetary policy, given that inflation is still running well above the Fed’s 2% annual target.
